Builders Incentives?

[newcomer]

http://finance.yahoo.com/real-estate/article/103373/Anxious-Builders-Pile-on-Incentives

“And those incentives are growing bigger. In California’s San Diego County, Chris Heller, a real-estate agent with Keller Williams Realty, says that until about 18 months ago, builders had little reason to offer incentives. Today, he says, “buyers are asking for the moon, and they’re often getting it.”

Mr. Heller says that on houses in the $700,000 range, his clients are typically scoring multiple concessions totaling as much as $80,000. Generally, that includes a price reduction, an agreement to pay closing costs or upgraded flooring or appliances — or a combination of all three.
”

[Bugs]

Any sales concession of value is effectively a price reduction. On a $700,000 transaction price, a concession package of $80,000 yields an 11% price reduction to a $620,000 sale price.

Whether they acknowledge it or not, these builders are significantly reducing prices until they can find their buyers. It’s one more reason the reported medians are somewhat misleading.

[Bugs]

Any sales concession of value is effectively a price reduction. On a $700,000 transaction price, a concession package of $80,000 yields an 11% price reduction to a $620,000 sale price.

Whether they acknowledge it or not, these builders are significantly reducing prices until they can find their buyers. It’s one more reason the reported medians are somewhat misleading.

[Bugs]

Any sales concession of value is effectively a price reduction. On a $700,000 transaction price, a concession package of $80,000 yields an 11% price reduction to a $620,000 sale price.

Whether they acknowledge it or not, these builders are significantly reducing prices until they can find their buyers. It’s one more reason the reported medians are somewhat misleading.

[temeculaguy]

Bugs, I’ve noticed the builders are more inclined to give upgrades and closing costs (only if you use their lender) rather than a price reduction. Are they trying to prop the value or is it because the upgrades don’t really cost them that much because of the mark up and using their lender isn’t always the best deal, tricksies or holding up the comps?

[temeculaguy]

Bugs, I’ve noticed the builders are more inclined to give upgrades and closing costs (only if you use their lender) rather than a price reduction. Are they trying to prop the value or is it because the upgrades don’t really cost them that much because of the mark up and using their lender isn’t always the best deal, tricksies or holding up the comps?

[temeculaguy]

Bugs, I’ve noticed the builders are more inclined to give upgrades and closing costs (only if you use their lender) rather than a price reduction. Are they trying to prop the value or is it because the upgrades don’t really cost them that much because of the mark up and using their lender isn’t always the best deal, tricksies or holding up the comps?

[Coronita]

Bugs, I've noticed the builders are more inclined to give upgrades and closing costs (only if you use their lender) rather than a price reduction. Are they trying to prop the value or is it because the upgrades don't really cost them that much because of the mark up and using their lender isn't always the best deal, tricksies or holding up the comps?

 

I think it's more like the don't want to piss off a bunch a previous buyers that purchased at a higher price. That way, officially, the purchase price of new buyers is effectively "similiar". Who keep tracks of the costs of the upgrades after the sale, outside of the buyer? Also, from property tax perspective, new buyers pay the same as old ones.

 It also saves face, and creates an illusion that the home prices are holding value. This is important, especially if you want to attract more new buyers. Who wants to buy, when you see the comps in the community going, down, and down. So pad the upgrades, and you can claim prices have been holding steady or even rising slightly.

 

 

Why someone would choose upgrades versus a price reduction when it comes to property taxes, I don't know. But I guess builders aren't willing to budge on prices (yet).

[Coronita]

Bugs, I've noticed the builders are more inclined to give upgrades and closing costs (only if you use their lender) rather than a price reduction. Are they trying to prop the value or is it because the upgrades don't really cost them that much because of the mark up and using their lender isn't always the best deal, tricksies or holding up the comps?

 

I think it's more like the don't want to piss off a bunch a previous buyers that purchased at a higher price. That way, officially, the purchase price of new buyers is effectively "similiar". Who keep tracks of the costs of the upgrades after the sale, outside of the buyer? Also, from property tax perspective, new buyers pay the same as old ones.

 It also saves face, and creates an illusion that the home prices are holding value. This is important, especially if you want to attract more new buyers. Who wants to buy, when you see the comps in the community going, down, and down. So pad the upgrades, and you can claim prices have been holding steady or even rising slightly.

 

 

Why someone would choose upgrades versus a price reduction when it comes to property taxes, I don't know. But I guess builders aren't willing to budge on prices (yet).

[Coronita]

Bugs, I've noticed the builders are more inclined to give upgrades and closing costs (only if you use their lender) rather than a price reduction. Are they trying to prop the value or is it because the upgrades don't really cost them that much because of the mark up and using their lender isn't always the best deal, tricksies or holding up the comps?

 

I think it's more like the don't want to piss off a bunch a previous buyers that purchased at a higher price. That way, officially, the purchase price of new buyers is effectively "similiar". Who keep tracks of the costs of the upgrades after the sale, outside of the buyer? Also, from property tax perspective, new buyers pay the same as old ones.

 It also saves face, and creates an illusion that the home prices are holding value. This is important, especially if you want to attract more new buyers. Who wants to buy, when you see the comps in the community going, down, and down. So pad the upgrades, and you can claim prices have been holding steady or even rising slightly.

 

 

Why someone would choose upgrades versus a price reduction when it comes to property taxes, I don't know. But I guess builders aren't willing to budge on prices (yet).

[temeculaguy]

I don’t think they care much about anyone already moved in but lowering advertised prices kills the pipeline deals (people with deposits down, yet haven’t closed escrow). One builder I visited has all but done away with posting prices, all deals are done in private, they don’t give you a price sheet and they are “accepting offers.” Even the salesman stops talking numbers when people walk in the office, like it’s a drug deal going down. At first it looked shady, worse than buying a car but now I get it. Anyone who has a deposit down doesn’t see what their future neighbors are paying, they don’t see the price reduction and they don’t pull out or demand the same discount. Even if I don’t buy there i am going to crash the first few block parties just to see if any fights break out.

[temeculaguy]

I don’t think they care much about anyone already moved in but lowering advertised prices kills the pipeline deals (people with deposits down, yet haven’t closed escrow). One builder I visited has all but done away with posting prices, all deals are done in private, they don’t give you a price sheet and they are “accepting offers.” Even the salesman stops talking numbers when people walk in the office, like it’s a drug deal going down. At first it looked shady, worse than buying a car but now I get it. Anyone who has a deposit down doesn’t see what their future neighbors are paying, they don’t see the price reduction and they don’t pull out or demand the same discount. Even if I don’t buy there i am going to crash the first few block parties just to see if any fights break out.

[temeculaguy]

I don’t think they care much about anyone already moved in but lowering advertised prices kills the pipeline deals (people with deposits down, yet haven’t closed escrow). One builder I visited has all but done away with posting prices, all deals are done in private, they don’t give you a price sheet and they are “accepting offers.” Even the salesman stops talking numbers when people walk in the office, like it’s a drug deal going down. At first it looked shady, worse than buying a car but now I get it. Anyone who has a deposit down doesn’t see what their future neighbors are paying, they don’t see the price reduction and they don’t pull out or demand the same discount. Even if I don’t buy there i am going to crash the first few block parties just to see if any fights break out.

[HLS]

FLU says it well.. Builders don’t want to lower the actual selling price. The illusion is protected.

BUGS can address this better, but the upgrades will be viewed differently to lenders and IF the appraisal (with upgrades)doesn’t meet the agreed selling price, financing will become a problem. Paying HOA’s, property taxes or other things actually reduce the selling price.

The real problem arises when someone agrees to pay $XXX and the appraisal is less. The dance begins.

I can never guarantee anyone that I can get them better financing than what a builder will offer, but it’s worth checking out. They squirm when they know that you are shopping.
The builder also adds to their profits by having a finger in the financing, and they play games with incentives.

If you want upgrades, it’s kind of crazy to buy the builder base model at a cheap price, and then start making chenges on your own. You can probably save some cash, but may void some builder warranties etc.

Years ago in Florida there were stories of a new Cadillac in the garage when you bought a condo. That doesn’t work anymore. Lenders don’t lend that way.

Builders have some influence with “their” appraisers.
It’s not a bad idea for a buyer to get an appraisal from an independent to confirm current value.

[HLS]

FLU says it well.. Builders don’t want to lower the actual selling price. The illusion is protected.

BUGS can address this better, but the upgrades will be viewed differently to lenders and IF the appraisal (with upgrades)doesn’t meet the agreed selling price, financing will become a problem. Paying HOA’s, property taxes or other things actually reduce the selling price.

The real problem arises when someone agrees to pay $XXX and the appraisal is less. The dance begins.

I can never guarantee anyone that I can get them better financing than what a builder will offer, but it’s worth checking out. They squirm when they know that you are shopping.
The builder also adds to their profits by having a finger in the financing, and they play games with incentives.

If you want upgrades, it’s kind of crazy to buy the builder base model at a cheap price, and then start making chenges on your own. You can probably save some cash, but may void some builder warranties etc.

Years ago in Florida there were stories of a new Cadillac in the garage when you bought a condo. That doesn’t work anymore. Lenders don’t lend that way.

Builders have some influence with “their” appraisers.
It’s not a bad idea for a buyer to get an appraisal from an independent to confirm current value.

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